Australia Woolworth's Tipped to Move Soon on Alh

Australia's largest grocer, Woolworths Ltd., is likely to make a takeover offer soon for pubs company Australian Leisure & Hospital Group Ltd. (ALH) after buying a key stake through a joint venture, analysts said on Monday.

Woolworths and privately-held joint venture partner The Bruce Mathieson Group last week said they had bought about 16 percent in ALH, a move that could lead to a takeover valuing the pubs company at more than A$1 billion ($710 million).

Woolworths and privately-held joint venture partner The Bruce Mathieson Group last week said they had bought about 16 percent in ALH, a move that could lead to a takeover valuing the pubs company at more than A$1 billion ($710 million).

"I suspect it would be sooner rather than later," said Paul Xiradis, managing director at fund manager Ausbil Dexia, which owns less than five percent of ALH.

"How we would react to that would depend on the price. We still think there is inherent good value within the company for the medium and also the longer-term, so to extract our holding it has to make up for that."

ALH met with the joint venture bidding company Bruandwo on Sunday but said it had not received any specific proposals.

ALH shares closed up three percent at A$3.07 in a flat market after touching a record high of A$3.12. The shares surged on Thursday when the Woolworth's venture bought more than 10 percent of the company at A$2.75.

Analysts said Woolworths may need to pay more than A$3.20, but the price would also hinge on whether a competing bidder emerged despite the stake built up by the joint venture and the clear synergies that would flow to Woolworths.

"I wouldn't rule it out completely but it is difficult to imagine there would be one," Macquarie Equities analyst Steve Wheen said.

PURCHASING CLOUT

Competition between Woolworth's and main rival Coles Myer Ltd. for a bigger slice of Australia's A$65 billion retail food market has been fierce and in recent years the grocery turf wars have spilled over to liquor, fuel and fresh food.

Coles Myer and Woolworths are Australia's largest liquor retailers with about 30 to 40 percent of the market, according to analyst estimates, while ALH has up to five percent.

The ALH business would allow Woolworth's to expand its liquor retailing in Queensland, where stand-alone bottle shops must be operated by holders of pub licenses.

Woolworths could also bring its clout from greater liquor purchasing power to ALH and would benefit from land development options available at 87 ALH sites from next year.

Portfolio Partners investment analyst Chris Williams said Woolworths would be unable to attain synergy benefits, make operational decisions or influence the board with only a 16 percent shareholding.

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